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Average construction dispute value hits record level in 2020

The average value of construction disputes hit a record level in 2020, rising to £27.7m.

The figure represented a 117% increase on 2017, according to a survey by consultant Arcadis.

Meanwhile, 75% of respondents encountered disputes of claims specific to covid-19, Arcadis found.

But the average length of time to resolve disputes remained was less than 10 months – in line with the average amount of time taken in 2019.

Arcadis said that the data, featured in its 11th annual “Global Construction Disputes Report 2021: The road to early resolution,” illustrated industry-wide “ripple effects” of the covid-19 pandemic.

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All regions surveyed saw an increase in “mega disputes” related to bigger capital programmes and private projects, which Arcadis said partially explained the increase in dispute value seen during 2020.

The main cause of disputes was owners, contractors, or subcontractors failing to understand and/or comply with their contractual obligations, according to the survey. That was followed by errors and/or omissions in the contract document and failure to make interim awards on extensions of time and compensation as the second and third-leading causes.

Most disputes were settled through adjudication, while buildings in the education, healthcare, retail and government sectors saw the most disputes.

Gary Kitt, head of UK contract solutions at Arcadis, said: “Against the backdrop of 2020, it is not surprising that the average value of disputes in the UK increased significantly, and that nearly three quarters of respondents had encountered disputes or claims specific to covid-19. However, it is promising that the UK continues to be the global leader in resolving disputes in a timely manner.

“The most common cause of disputes in the UK was the parties failing to understand or comply with their contractual obligations. This underlines how good contract administration and project management can be pivotal in either avoiding disputes in the first place or assisting with mitigating their impacts.

“While some commentators predict the UK construction market will not return to pre-covid-19 output levels until 2022, early 2021 UK government gross domestic product figures suggest construction is leading the region’s post-pandemic economic recovery. This should create an excellent opportunity for the industry to continue to implement collaborative dispute avoidance measures which allows time and energy to be best spent in delivering projects.”

The full 2021 Global Construction Disputes Report can be found here.